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U.S. Health Care Spending Health care spending is a major concern for many Americans. Pharmaceuticals are the only health care sector with a cost containment mechanism built into the patent process whereby generic versions of higher cost brand name prescription medicines eventually become available. Pharmaceuticals account for around 10% of annual total health care spending. Over the next decade, growth in prescription medicine spending is expected to slow as more brand name products lose patent protection, generic usage grows and the approval and entry of new prescription medicines into the market slows. Slowing pharmaceutical growth raises some concerns as fewer funds become available for the research and development of new treatments and cures. Background Health care spending was a key issue during the turbulent health reform debate in 2009 and 2010. Surprising to many, prescription medicines only account for approximately 10 cents out of every dollar spent on health care.1 Over the past few years, the increased use of cheaper generics, driven mainly by patent expirations, and fewer new product launches have reduced prescription medicine spending growth to the lowest rates since 1963.2 Looking ahead, growth in annual prescription medicine spending is expected to hover only around 5% between 2009 and 2014 according to official government estimates. Other health care experts estimate the growth to be lower over a good portion of the coming decade.3 As a result of the recession and subsequent recovery, health care will continue to capture a larger portion of GDP due to lower growth rates in other sectors of the economy. However, with over 70% of all prescriptions being filled as cheaper generics and $136 billion worth of patent protected sales expiring over the next five years, the pharmaceutical industry's impact on overall health care expenditures will continue to be minimized.4 This trend will be compounded by the fact that there are fewer prescription medicines currently scheduled for future development. Those prescription medicines making it through clinical trials will face a more stringent FDA approval process which will further reduce the industry's overall impact on health care spending. Reigning in total health expenditures without sacrificing quality will require looking holistically at the entire health care system and focusing on areas of inefficiency beyond individual sectors whose growth is already modest. Focusing too heavily on prescription medicine spending could choke off essential revenue needed for the research and development of future medicines. Key Facts and Figures
Pfizer's Position Pfizer recognizes the concern over rising health care spending in the U.S. Under the new health reform law, Pfizer has agreed to increased rebates and fees in an effort to bring total spending under control. However, policymakers should be aware that medicines are a relatively inexpensive option relative to other health care interventions and only a very small percentage of total health spending. Focusing on prescription medicine expenditures as a means to tame overall health care spending ignores other significant factors driving spending growth and runs the risk of reducing investment dollars for tomorrow's medicines. |
